Chevron's Shareholders Should Say No to Offshore Drilling

Next week, Chevron -- California's largest corporation and the nation's third largest -- holds its annual shareholder meeting in San Ramon. The gathering will be met by protesters, including those who will travel from Angola, Nigeria, Canada, Alaska, and the U.S. Gulf Coast to demonstrate against Chevron's deep-sea operations and to deliver a new report to the company: The True Cost of Chevron: An Alternative Annual Report[2].

At the meeting, Chevron will ask shareholder permission to pursue an aggressive expansion into ever-deeper offshore operations. Chevron's role in the aftermath of BP Deepwater Horizon disaster, and investigations finding systemic problems within the entire offshore industry, should give both its shareholders and the broader public great concern about the safety of this expansion. Chevron is well aware of the dangers. As the company writes, "Navigating uncertain weather conditions, freezing water and crushing pressure, deepwater drilling is one of the most technologically challenging ways of finding and extracting oil."

On April 20, 2010, the Deepwater Horizon drilling rig exploded 50 miles off the coast of Louisiana, killing 11 men and igniting what would become the largest unintentional oil spill in world history. A massive underwater blowout at BP's Macondo well 18,500 feet below the ocean surface was the immediate cause. Within weeks of the blowout, a horrifying fact was revealed. Not a single major oil company, including Chevron, knew what to do in response, nor did government regulators.

All knew that a blowout was likely, but none had developed the technology, much less the equipment, with which to address it. Blowouts have been on the rise in the Gulf of Mexico. From 2005 to 2010, 28 blowouts occurred in the Gulf of Mexico, four of which took place in the 18th months preceding the blowout of the Macondo well. From 1999 to 2004, there were 20 blowouts, and from 1993 to 1998 there were just 11.

Moreover, deaths, fires, and serious injury in the Gulf of Mexico are common. For example, a Chevron offshore worker has been killed on the job in four out of the last five years (2006, 2008, 2009, 2010) in the Gulf of Mexico. In 2009 alone (the most recent year data is available), Chevron reported 15 incidents of fire and nine employee injuries at its Gulf of Mexico offshore operations.

In just the five years before the Deepwater Horizon exploded, federal investigators documented nearly 200 safety[3] and environmental violations in accidents on platforms and rigs in the Gulf. While BP lead the others with at least 47 accidents or blowouts, Chevron was a very close second at 46, and Shell had 22. Instead of preparing for a deepwater blowout, however, in the words of the President's National Oil Spill Commission[4], every major oil company "learned on the fly" for 87 long days. They tried to apply shallow water technology applicable to wells at 400 feet below the ocean surface or less, to a well 5,000 feet below.

While they learned, 210 million[5] gallons of oil were released into the Gulf. Once the oil was released, we learned that no company, including Chevron, had invested any significant dollars into cleanup research or preparedness, although all were required to do so under the 1990 Oil Pollution Act. Ships to contain the oil were not ready, nor were adequate boom or skimmers to protect the shore. And while all of their applications to drill deepwater wells state their preparedness for even much larger oil spills than that at the Macondo, the companies were not prepared.

Instead, they applied the same failed technology that had recovered just 14 percent of the oil spilled in the Exxon Valdez disaster over 20 years earlier to the Macondo well gusher. The failures that led to the explosion, moreover, were in no way limited to just BP. While BP was the leasee of the Deepwater Horizon, Transocean was the owner and operator. All the major oil companies use Transocean's services, including Chevron.

However, since 2008, 73 percent[6] of incidents that triggered federal investigations into safety and other problems on deepwater drilling rigs in the Gulf have been on rigs operated by Transocean. Chevron, the largest leaseholder in the Gulf of Mexico, is pushing the limits in these operations. It's latest project, Moccasin[7], is situated 216 miles offshore Louisiana, at a water depth of 6,750 feet -- over 150 miles farther out from shore than the Macondo and 1,750 feet further below the ocean surface. Initial drilling began in March 2010 by Transocean's Discoverer Inspiration drill ship.

Professor Robert Bea, head of the Deepwater Horizon Study Group at the University of California, told me of the group's final findings (not yet released): "We have come to a unwavering conclusion. This is an industry problem. It is not just BP. BP just got to the finish line first. They know this is an endemic systemic problem."

If we do not want Chevron to follow, Chevron's shareholders must demand the same protections provided here in California -- a moratorium on offshore drilling -- be provided nationally and, if possible, internationally as well.